Australian Income Tax Rates 2026-27: 15% Rate Cut, How Much You Keep

From 1 July 2026, Australian resident income tax rates are cut — the second bracket drops from 16% to 15%, meaning every taxpayer earning above $18,200 keeps more of every dollar in that band. The 2026-27 tax scales deliver the largest dollar savings for earners in the $45,001–$135,000 range, which is also the income band where most first-home buyers sit. If you are building a deposit, the difference between the old 16% rate and the new 15% rate is real money that can go straight into your home loan deposit or offset account.

The key numbers for FY2026-27 (excluding the 2% Medicare Levy):

• $0–$18,200: no tax (tax-free threshold unchanged)
• $18,201–$45,000: 15 cents per dollar over $18,200 (was 16% in 2025-26)
• $45,001–$135,000: $4,020 plus 30 cents per dollar over $45,000
• $135,001–$190,000: $31,020 plus 37 cents per dollar over $135,000
• $190,001 and above: $51,370 plus 45 cents per dollar over $190,000

What the 16%→15% cut means dollar-for-dollar: for someone earning $45,000, the saving is about $268 for the year. At $90,000, it is the same $268 because the saving only happens in the $18,201–$45,000 band — the higher brackets are unchanged in 2026-27. The next scheduled cut is from 1 July 2027, when the 15% rate drops again to 14%.

How much tax do you actually pay at common income levels?

For an income of $60,000: tax is $4,020 (on the first $45,000) plus 30% of $15,000 = $4,500, total $8,520, not counting the Medicare Levy. Add the 2% Medicare Levy ($1,200) and the total tax and levy is $9,720. For $100,000: $4,020 plus 30% of $55,000 = $16,500, total $20,520 before Medicare Levy. The marginal rate at $100,000 is 30%, meaning each extra dollar earned loses 30 cents to tax (32 cents with Medicare Levy).

For a couple both earning $90,000 (combined $180,000 household income), each pays about $17,520 in tax plus $1,800 Medicare Levy — roughly $38,640 combined before any deductions or offsets. This is the income range where decisions about salary sacrifice into super, negative gearing on an investment property, or structuring deductible debt can materially change the tax outcome for the year.

For high-income earners at $200,000: tax is $51,370 plus 45% of $9,999 = $55,870 (plus $4,000 Medicare Levy = $59,870). The effective average tax rate at $200,000 is about 27.9%, but the marginal rate on the last dollar is 47% including Medicare Levy — which makes tax-deductible strategies (super contributions, investment loan interest, depreciation schedules) especially important at this level.

How does the tax-free threshold work in practice?

The $18,200 tax-free threshold means you pay zero tax on the first $18,200 of your taxable income. If you earn less than $18,200 in a full financial year, you pay no income tax and generally get back any tax your employer withheld through your tax return. The threshold is only available to Australian tax residents — non-residents pay tax from the first dollar at 30% (see our foreign buyer tax guide for the implications for overseas property investors).

Where does this leave a first-home buyer?

Most first-home buyers are in the $60,000–$120,000 income range, which means they face a marginal tax rate of 30% (plus 2% Medicare Levy). The practical takeaway: the 2026-27 tax scales leave about 68% of each extra dollar in your pocket, which is enough to make a disciplined savings plan work — especially when combined with the First Home Super Saver Scheme (FHSSS), which lets you salary-sacrifice up to $15,000 per year into super at a 15% tax rate instead of your 32% marginal rate. The gap between 32% and 15% is the government effectively paying you to save for a home.

For a buyer targeting a $700,000 property with a 10% deposit ($70,000), the FHSSS can accelerate deposit savings by $3,000–$5,000 per year depending on income — numbers that matter when stamp duty calculators show you need every dollar.

Information sources and data currency

All tax rates and thresholds in this article are drawn from the Australian Taxation Office’s published scales for the 2026-27 financial year (1 July 2026 to 30 June 2027). The 15% rate is confirmed law — it passed Parliament as part of the stage-three tax cut restructure and applies from 1 July 2026. The further cut to 14% from 1 July 2027 is legislated but always subject to future parliamentary decisions. Tax rates, thresholds and bracket structures can change; always verify with the ATO website or a registered tax agent before making financial decisions based on tax calculations.

Frequently asked questions

Does the 15% rate cut apply to everyone?

The 15% rate applies to all Australian tax residents earning above $18,200. It replaces the old 16% rate on the $18,201–$45,000 band. Non-residents and working holiday makers have their own tax scales and do not receive the resident tax-free threshold or the 15% resident bracket.

How much extra take-home pay does the 16%→15% cut deliver?

The maximum saving is $268 per year. That number is reached by anyone whose taxable income is $45,000 or above — the saving is capped because the 15% rate only applies to the income band between $18,201 and $45,000 (a $26,800 band). The 1% cut on $26,800 equals $268.

When does the next tax cut happen?

The 15% rate is legislated to drop to 14% from 1 July 2027. That would deliver a further $268 annual saving (for a total of $536 compared to the old 16% rate). As with all forward legislation, the 2027 rate is subject to any changes a future Parliament may make.

Should I use the FHSSS to save for a home?

The First Home Super Saver Scheme lets you contribute up to $15,000 per year (capped at $50,000 total) into super and withdraw it for a first-home deposit. Contributions are taxed at 15% inside super instead of your marginal rate, which for most first-home buyers is 30% or higher. The tax saving goes into your deposit — but there are rules around contribution caps, withdrawal timing and eligibility. Speak with an Arrivau consultant who can run your specific numbers before committing.

Next steps for your home loan journey

Tax is only one input into how much you can borrow and how quickly you can save a deposit. Your borrowing power depends on your after-tax income, existing debts, living expenses and the APRA serviceability buffer. To see how your tax position translates into a real borrowing capacity, use our borrowing power calculator or speak with an Arrivau licensed mortgage consultant — we respond within one business day.

General information disclaimer

This article is general information only and is not personal financial, tax, legal or credit advice. Tax rates, thresholds and legislation can change. Arrivau Pty Ltd (ABN 81 643 901 599) provides credit assistance as an ASIC Credit Representative, CRN 530978. Consider your objectives, financial situation and needs, and seek licensed advice from a registered tax agent or financial adviser before making decisions based on tax calculations.